After staying quiet for over four months following the completion of the Precise Two acquisition, we believe Cache Logistics Trust (CACHE) may now be close to striking another acquisition deal in the near term. On last Friday evening, CACHE announced the incorporation of four wholly-owned subsidiaries, including a 100% stake in Cache Polar Logistics Warehouse (Shanghai) Co., Ltd. While no further details were given regarding the purpose of these entities except they are either investment holding or warehousing and logistics service companies, we are of the view that CACHE may be looking to acquire a warehouse facility in Shanghai, China. We note that CACHE’s financial position is one of the strongest among the S-REITs space. This gives CACHE the financial resources and flexibility to take on attractive acquisitions as they arise, in our opinion. We are keeping our forecasts unchanged for now, but as we transition our RNAV valuation method to the dividend discount model, our fair value is trimmed to S$1.30 from S$1.40. We maintain our BUY rating on CACHE.

Potential acquisition in near term
After staying quiet for over four months following the completion of the Precise Two acquisition on 1 Apr, we believe Cache Logistics Trust (CACHE) may now be close to striking another acquisition deal in the near term. On last Friday evening, CACHE announced the incorporation of four wholly-owned subsidiaries, including a 100% stake in Cache Polar Logistics Warehouse (Shanghai) Co., Ltd. While no further details were given regarding the purpose of these entities except they are either investment holding or warehousing and logistics service companies, we are of the view that CACHE may be looking to acquire a warehouse facility in Shanghai, China from a third party vendor, possibly logistics solutions provider Polar Logistics Group.

Strong financial standing supportive of growth
We note that CACHE’s financial position is one of the strongest among the S-REITs space. As at 30 Jun, CACHE’s aggregate leverage stood steady at 29.2%, giving it a sizeable debt headroom of circa S$100m before reaching the 35% gearing level. While we do not rule out any equity funding for potential investment opportunities (including our acquisition belief above), CACHE clearly has the financial resources and flexibility to take on attractive acquisitions as they arise, in our opinion.

Solid 2Q13 scorecard
To recap, CACHE turned in a firm set of 2Q13 results, with DPU growing by 8.4% YoY to 2.147 S cents notwithstanding an enlarged unit base post private placement in Mar. This was chiefly driven by rental escalations from its existing portfolio assets and full-quarter contribution from Precise Two. We remain positive that CACHE will meet our FY13-14 forecasts, if it continues to be successful in its search for earnings-accretive targets. We are keeping our forecasts unchanged for now, but as we transition our RNAV valuation method to the dividend discount model, our fair value is trimmed to S$1.30 from S$1.40. We maintain our BUY rating on CACHE.

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